Stricter tax policy continues in 2014

The consolidation of public finances was one of the most important task of the government of Montenegro in 2013. They increased tax control, VAT increased from 17% to 19%, and spending was reduced in the public sector. All this contributed to the fact that Montenegro increased its budget revenue by nearly 10% for 2013. The fiscal discipline will continue in 2014. In the first few months there have been registered higher budget revenues than it was originally planned. During 2014 there will be new tax policy changes and an increase in excise duties on some products.

In order to minimize the level of gray economy for this year the government has announced changes in the Law on Excise Tax and the Law on Value Added Tax. Regarding changes in the tax calculation, the government has reached to this decision based on the assumption that certain segments of the economy do not pay their obligations properly. According to their estimates those are: lawyers, taxi drivers, transport companies and private health facilities.

The Ministry of Finance will therefore, in cooperation with the Tax Administration, prepare a separate analysis of tax debts with an assessment of their collectability. It is assumed that some economic sectors untimely submit reports on tax payments. The government is considering changes to the way the tax collection for lawyers, taxi drivers, transport companies and private health facilities. These occupations have so far paid taxes at a uniform annual basis, regardless of income. With amendments to the Act, the Government intends that these occupations begin to pay tax in accordance with their revenues.

In addition to expanding the tax base in certain occupations, the focus of the financial policy of the government in 2014 will be the stricter control of employment, as well as the elimination of the black market. Results of the analysis carried out by the Faculty of Economics, shows that 14% of the employees in Montenegro works illegally, while employers pay 16% taxes and the minimum wage of 193 euros. This causes the total deficit of 90 million or 6.8% of the projected budget for 2014. If one starts from the fact that Montenegro has an average of 170,000 employees then one would come up with figures that 24,000 of them work illegally, while employers pay the minimum wage for 27,000 employees.

The measures that the government of Montenegro is planning to implement during 2014 received support from the World Bank. World Bank Director for South East Europe, Ellen Goldstein, announced late last month that this financial institution will approve two loans to Montenegro in the amount of 50 million dollars, which will be intended for increasing the efficiency of public spending and better collection of taxes.